| Cash Vouchers \ Bank Vouchers |
| · Check authorization of Cash Vouchers \ Bank Vouchers by a responsible person. |
| · Check supporting Bills / Invoices |
| · Check the correctness of the accounting head – expense / income |
| · Check for cash receipts signature /acknowledgement of cash recd. |
| · Check that all the relevant columns of the Cash/ bank vouchers have been properly filled in. |
| · Check that all the supportings to the Vouchers are crossed as cancelled after the payment. |
| · Check that payments are made only against original supportings. |
| Purchase Vouchers |
| · Check authorization of Purchase Vouchers by a responsible person. |
| · Check the Purchase Voucher with the supporting documents like Bill / Invoice and the Goods Received Note(GRN). |
| · Check whether the rates given in the purchase invoices are as per the purchase Orders raised/amendments to the Purchase Orders/ approved by an appropriate authority. |
| · Check whether payment has been made/Bill passed for rejected quantity of material as per the GRR. |
| · Check whether a proper accounting head - expense has been debited. |
| · Check that all the relevant columns of the Purchase Vouchers have been properly filled in. |
| · Check that the PV is passed as per the terms given in the Purchase Orders. |
| · Check that the purchase voucher is prepared only in respect of original Bills / Invoices. |
| · Photocopies of invoices \ duplicate invoices should not be passed. |
| · Check that the Bills / invoices are passed strictly as per the PO terms. |
| Journal Vouchers |
| · Check authorization of Journal Vouchers by a responsible person. |
| · Check the Journal vouchers with supporting Bills / Invoices /documents. |
| · Check that supporting documents are duly approved by an appropriate authority. |
| · Check the correctness of the accounting head - debit / credit. |
| · Check that all the relevant columns of the journal vouchers have been properly filled in. |
| · In case of contractors bills check that bills submitted by the contractors are supported by the Work Orders issued in advance to the contractors. No bill should be passed unless supported by a/ WO and the value of the Bill should be in agreement with the WO prepared. Check that the Work Orders are prepared in advance before the start of the work. |
| · Check that the bills of the contractors are duly approved and certified for payment by the person responsible for getting the work done i.e the user. All the bills must have “Approval” for payment in writing by the user on the face of the bill. |
| · Check that all the supporting bills / invoices to a journal voucher are approved / certified for payment by the User Department. The user Department should specifically put a remark on the bill for approval\ payment. |
| · In case of contract jobs relating to labour supply the bills are to be supported by attendance sheets duly certified by the Time Office. |
| · In case of transporters bills - check the bills with the agreed rates and receipted copies of consignment notes. |
| · Check the measurement books in case of bills for civil work and ensure that the Measurement books are signed and checked by the Engineer in charge of the Work. |
| · In case of running and final bills for civil work check that the civil engineer has checked and verified the measurements and entries of all running and final bills are made in the Measurement Books. |
| Advance to Employees |
| · Check the Trial balance in respect of Advance to employees to ascertain the amount outstanding in the name of each employee. Find out the date since when the advance is outstanding to be settled and make a list if employees advances that have not been settled for a long period. |
| · Ensure that no further advance is given to an employee unless the previous outstanding advance is cleared by him. |
| · Advance to an employee may be towards - Travel / Official work\ loan or a salary advance. Ensure that the recovery is made from the salary of the employee when the advance taken by the employee is not settled by him within a reasonable period. |
| · Further check that the recovery of installments in respect of loan / salary advance is made correctly on monthly basis from the salary of the employees. |
| · Check and make a list of employees who have left the company and their full and final settlements have not been made but debit balances are still appearing in their names in the Advance to employees account. |
| Confirmation of Balances |
| · Confirmation of balances with the banks \ Lending institutions should be obtained on a monthly basis for the purpose of preparation of bank reconciliation statements. |
| · Confirmation of balances with the Creditors / Debitors should be obtained on a six monthly basis. The balances in the Creditors\ Debtors Ledger account should also be reconciled with the balances as per the party’s books on a six monthly basis. |
| Debtors Ledger Trial Balance \ Debtors Ledger account |
| · Check that the balance shown by the Debtors Ledger Trial balance agrees with the balance shown by the Debtors control account in the General Ledger Trial balance. |
| · Check the Agewise analysis of Sundry Debtors and comment upon it. |
| · Check the Debtors Accounts that are stuck up for long and are doubtful of recovery. |
| · Check the debtors accounts where legal cases have been filed / are to be filed and ascertain the progress in the legal cases. |
| · Carry out a scrutiny of various Debtors Account in the debtors ledger and check for the following :- |
| o Match the Debit and Credit entries individually. |
| o Give the break up of the closing balance - Invoice wise. |
| o Ensure that there are no such cases where the payments have been received for later bills and the earlier invoiced are unpaid. |
| o Give a break up of the closing balance as above in (b) including the details of any debits on account of debit notes raised on the parties. |
| o Prepare a list of Debtors account showing closing credit balances. |
| o Tally each debit with a corresponding credit to locate any under payment / over payment for any invoices. |
| Creditors Ledger Trial Balance/Creditors Ledger Account |
| · Check that the balance shown by the Creditors Ledger Trial Balance agrees with the balance shown by the Creditors control account in the General ledger trial balance. |
| · Check the creditors account that are outstanding to be paid since long (unclaimed Creditors) and that can be considered for a write back in the books of account. |
| · Carry out a scrutiny of various Creditors account in the creditors ledger and check for the following. |
| o Match the Credit and Debit entries correspondingly. |
| o Give the break up of the closing balance – Invoice wise. |
| o Ensure that there are no such cases when the payments have been made for later invoices and the earlier bills are unpaid. |
| o Give a break up of the closing balance as above in i (b) including the details of any credits on account of credit notes raised on the party. |
| o Prepare a list of creditors account showing closing debit balances alongwith the reasons for debit balances. Comments or details should be taken from the auditee in respect of every single debit balance. |
| o Tally each credit with a corresponding debit to locate any over payment /under payment for any invoice. |
| · Check all the Creditors Ledger Trial balance as given below for above details. |
| - Suppliers |
| - Contractors |
| - Transporters |
| - Others |
| Outstanding Liabilities |
| Check that the outstanding liabilities pertaining to the earlier years have been adjusted in the books of account. |
| Excise V/s Accounts Reconciliation |
| · Ensure that a reconciliation statement is prepared on a monthly basis to reconcile the modvat / Cenvat balance in the excise with the accounts balances. |
| · Check if any old pending entry is appearing in the reconciliation statement. |
| · Check the unreconciled / reconciled difference in the balances shown by the excise records and the accounts records. |
| TDS |
| · Check that all TDS deductions are deposited in time with the government - check the monthly TDS statement and the actual date of deposit with the TDS challans. |
| · Check whether the TDS Returns are submitted in time with the Government. |
| · Check that the TDS deductions are made properly from all the payees wherever applicable. |
| Budget V/s Actual - Expenses |
| · Check the Budget V/s Actual position as on a particular date with the Budget statement for all the expenses - Fixed / Variable overheads. |
| · Check the Variances between the Budget / Actual figures. |
| · Obtain comments on reasons for variances between the Budget V/s Actual. |
| · Analyse the variances between Budget / Actual in terms of percentage. |
| Scrutiny of Ledger Account - Expenses / Others |
| · Check that in case of expenses the distination between Capital and Revenue expenditure is properly made. |
| · Check that proper account head has been used to debit the expenses. |
| · Pick up a few entries from the ledger account and trace the entry to the Voucher and the supporting bills / Invoices to ensure that the expense bills are properly approved / authorized and accounted for. |
| General Ledger Trial Balance / Revenue ledger Trial Balance |
| · Carry out a scrutiny of the General Ledger Trial balance/Revenue ledger Trial balance and comment on accounts that need to be reconciled like inter office account / Inter unit account etc. |
| · In case of accounts like TDS Receivable / Interest Receivable/ Insurance claim Receivable / Margin money deposit with banks ask for the break up / detailed statements of accounts and comment upon it. |
| · In case of Creditors / Debtors account check that the amount as given in the General ledger agree with the balance shown by the Creditors ledger Trial balance/ Debtors ledger Trial balance. |
| · Check whether any special accounts like suspense account etc are appearing in the trial balance and carry out a scrutiny. |
| · In case of other accounts carry out a review of the ledger of the account to locate any irregularity / reconciliation matter |
| Internal Audit Checklist of Physical Verification of Cash |
| (1) Carry out a surprise physical verification of cash. |
| (2) Check that the physical cash balance tallies with the balance shown by the cash book. |
| (3) Check that the cash book is upto date at all times. |
| (4) Check that the cash in safe/cash in transit is within the insurance cover taken. |
| (5) Check that fidelity insurance cover is taken in the names of persons who have the custody of cash. |
| (6) Check that receipts are issued by the cashier at the time of receipt of cash from the employees / others. |
| (5) Check that signatures of the payee are taken by the cashier on the cash payment Voucher at the time of making cash payment. |
| Internal Audit Checklist of Bank Reconciliation Statement |
| (1) Check that Bank reconciliation statements in respect of all the bank accounts are prepared on a monthly basis. |
| (2) Check that the entries appearing in the Bank reconciliation statements are cleared in the subsequent month. |
| (3) Check for any old pending entry and inquire into the nature and details of such an outstanding entry. |
| (4) Check that entries relating to cheques issued but not presented for payment for more than 6 months are reversed. |
| (5) Check that all post dated cheques received are kept in safe custody until deposited. |
| (5) Cheque that all cancelled cheques are kept properly in the cheque book. |
| (7) Check the cheque signing authorization levels of management and ensure that the cheques are signed according to the prescribed and delegated authority. |
| (8) Check that cheque books / counter foils are kept in safe custody. |
| Internal Audit Checklist of Investments |
| (1). Check whether a Register of Investment is maintained. (Manual / On computer) |
| (2). Check that the Register of Investment gives the necessary details like |
| (a) Description of the Investments. |
| (b) Name of the corporate bodies / other entities where the Investments have been made. |
| (c) Distinctive number of certificates |
| (d) No. of certificates -shares/ debentures / other securities. |
| (e) Face value / paid up values of Investment made |
| (3). Check that the certificates of investment are kept securely and in safe custody. |
| (4). Ensure that a physical verification of investment scripts is carried out say at least once in a year and physically found scripts are tallied with the details given in the Register of Investment. Discrepancies if any should be reported. |
| (5). Ensure that the proper record is made in the Register of Investment in respect of Bonus Issue of shares and debentures, Rights Issue of shares/ debentures etc . |
| (6). The entries in the Register of Investment should be tallied and reconciled with the entries in the printed Annual Accounts. Balance sheet - to locate any differences. |
| (7) Ensure that all the investments made are in the name of the company and all the transfers have been made and recorded and effected in the name of company . |
| (8) Ensure that all the income accounted / due in respect of all the investment made is received and accounted for in the name of company. |
| (9). Ensure that all the transactions in investment are authorized by a resolution of the Board of Directors or by the person to whom the powers have been delegated . |
| (10). Check that where any shares or securities in which investment have been made by the company are not held by it in its own name the company has entered the details in a register in terms of section (7) of the Companies Act .The register shall disclose |
| (a) the nature, value and such other particulars as may be necessary fully to identify the shares or securities and |
| (b) the bank and person in whose name or custody the shares or securities are held. |
| (11). Carry out a scrutiny of the investment account in the ledger to ensure that proper accounting entries have been passed in the ledger account - .Vouchers may also be verified to ensure proper authorization etc. |
| REVENUE |
| Revenue Recognition |
| Revenue Leakage |
| Collection |
| Checklist of Fixed Asset Register |
| (1) Check that a Fixed Assets Register is maintained and updated at all times ( Manual / Computerized ). |
| (2) Check that the Fixed Assets Register gives details of the fixed assets - Quantity / No / Location / Identification Number / Depreciation / Rate / accumulated depreciation / original cost / additions /deletions/ written down value. |
| (3) Check that the identification number given on the fixed asset tallies with the number given in the FA Register. |
| (4) Check that for purchases as well as sale of fixed assets proper authorization has been taken from the appropriate authorities |
| (5) Check that the discrepancies observed on physical verification of fixed assets have been correctly adjusted in the books of account after taking approval from the appropriate authority. |
| (6) Check the method and the procedure adopted for carrying out the physical verification of fixed assets and ensure that verification was carried out as per the generally accepted accounting practices and procedures. |
| (7) Check that the physical verification sheets in respect of fixed assets are properly prepared and duly signed by the persons responsible for carrying out the physical verification. The name, designation of employees and the date of carrying out the physical verification should also be clearly mentioned in the physical verification sheets. |
| (8) Check that the physical verification of Fixed Assets is carried out by the Management at least once in 3 years. |
| Internal Audit Checklist of Outsourcing / Job work |
| OUTSOURCING |
| · Ensure that Norms are set in respect of Input - Output of outsourcing jobs. |
| · Ensure that control is kept over the outsourcing jobs on a consignment to consignment basis. The consignment wise control should be exercised for Input - Output. Any shortages / deviation from the set input-output Norms on the basis of every consignment should be inquired into and suitable recovery made from the processor. Norms should also be set for process loss / Wastage/ Scrap etc. |
| · Quantity / Value reconciliation with the processor should also be made on a consignment to Consignment basis and a monthly stock certificate be obtained from the processor. Any shortage / Excess in input-output should be adjusted / accounted for in the books also on a consignment to consignment basis. This would ensure a proper control over the quantity of raw material sent to the job processor and the quantity of finished product received from the processor. |
| · The contract with the job processors should be entered for a fixed period subject to renewal. The contract should clearly lay down the terms and conditions (including the Input - Output Norms). |
| · The rates for carrying out the jobs work should be finalized after a proper comparison of the rates and further negotiation. |
| · The terms and conditions of the contract should include the period within which the processor has to carry out the job after the receipt of the material. A penal clause should be included in the contract to this effect. |
| · Ensure that there is a proper control on moulds sent to outsourcing parties and the same are reconciled with periodic statements received from the parties with the total quantity /no despatched by plants. |
| · As far as possible there should be a central Agency (such as Outsourcing Department, H.O.) who deals with all the moulders and distribute the work accordingly from the plants. Also ensure that mould directly received by party from vendors / suppliers are reported to / accounted for by the respective plants. |
| · Ensure that all moulds are returned by parties concerned to the respective locations / plants, once the jobs are completed. |
| · Check if the moulds sent to the contractors are not returned to the Company within a period of six months, whether a debit note or invoice on the excise duty paid by the company is raised on the contractor. |
| Internal Audit Checklist of Personnel & Time Office |
| PERSONNEL & TIME OFFICE |
| · Obtain a list of sanctioned strength - Department wise and compare with the actual strength of the employees. Note the variation and comment upon the cases where the actual strength of the employees is more than the sanctioned strength. Check approval for the extra man power deployed. |
| · Review the personnel service files of employees kept by the Personnel Department to check whether – |
| o all the copies of certificates / testimonials have been taken from the employees at the time of joining . |
| o Nomination in case of Gratuity / Pension / PF / superannuation etc have been collected from the employees |
| o all the other documents like increment letters / promotion letters etc are properly filed in the service files . |
| o Copies of appointment advice / appointment letters / confirmation letters etc are kept in the service files. |
| · Obtain a list of all the pending legal cases being handled by the Personnel Department. Check the status of all the legal cases including the date of next hearing. Comment upon the speedy settlement of the legal cases . For keeping an effective control over the legal cases the Personnel Department should prepare a status report of pending legal cases on a monthly basis. |
| · Ensure that the Personnel Department is taking due care in case of contract labour employed by it to ensure that legal and statutory obligation like FPS / PF / ESI are taken care of. The Personnel Department should maintain proper attendance record in respect of the contract labour and should obtain copies of monthly PF / ESI challans from the contractor . |
| · Check that the various licenses like the Factory license / license under the Contract labour (abolition + regulation ) act 1970 / license for storage of inflammable and hazardous chemicals etc. are renewed in time. |
| · Ensure that the various provisions of industrial and labour laws |
| § like àThe Apprentices Act / Factories Act / Payment of wages Act |
| § / Minimum wages Act etc. are duly taken care of. |
| · Ensure that proper attendance / leave records are maintained by the Personnel Department is respect of all the workmen / staff / officers/ managers / higher management. |
| · Check the leave / attendance record of employees (register / |
| · punch card/ computerized attendance printouts) to ensure that there are no irregularities. Comment on the irregularities. if any, observed .\ |
| · Examine the agreement with the Union and ensure that the terms and conditions as agreed to by the parties to the agreement are duty complied with. Examples : Incentive scheme, loan / advance scheme , facilities, attendance procedure, leave procedure , festival advance , canteen / tea, transport ,uniform, production etc. Further check the various schemes linked to production / output to ensure that the payment under various incentive schemes are made strictly as per the laid down productivity linked / incentive scheme . |
| · Ensure that the system installed at various locations to mark the attendance(in/out) are working properly and are giving consistent results. |
| · Check the record relating to attendance / leave including a cross verification of data and ensure that the methods and procedure for recording of attendance / leave are sound and sufficient internal controls exist. Point out the lacunae / weakness in the internal control system. |
| · In case of productivity linked schemes ensure that there is a proper system to record and measure the quantity / quality / output of each employee. |
| · Check whether the consent letters have been obtained from the State Pollution Control Boards in respect of AIR / WATER. |
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